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Osborne faces MPs over rating blow
George Osborne is to answer to MPs for the loss of the UK's prized AAA credit rating, after Labour was granted an urgent question in the House of Commons on the issue.
The Chancellor is to respond in the Commons to shadow chancellor Ed Balls amid the continued political and economic fallout of Friday's downgrade.
He suffered a serious reverse on Friday when ratings agency Moody's revised downward its verdict on the UK economy - intensifying the pressure on sterling.
Ministers have played down the impact of the change on the Government's borrowing costs which had already been largely priced into the markets.
But Labour has hailed it as a "humiliation" for Mr Osborne, who previously declared that retaining the top-grade rating was a measure of the success of his austerity drive. The Opposition is pushing for a change of course, with borrowing increased in the short term to fund a fiscal stimulus. Amid intense pressure from all sides on Mr Osborne ahead of next month's Budget, Tory backbenchers are calling for tax and spending cuts to kick-start growth.
The pound weakened during overnight trading in Asia, leaving it at a 31-month low against the US dollar and at a 16-month low against the resurgent euro. But much of the reaction to the Moody's downgrade had been priced into markets following a run of recent poor economic updates.
In contrast, the FTSE 100 Index was unmoved by the economic gloom as a large proportion of its earnings comes from overseas, triggering potential benefits from the weakness of sterling. ETX Capital market strategist Ishaq Siddiqi said: "Most in the markets see the downgrade as a symbolic move that will likely heat up the political discussions over the UK's damp economic growth prospects and spur the coalition Government to launch bolder policies to drive growth."
Despite the downgrade, David Cameron's official spokesman insisted that the Government's economic plan was "working" and the Prime Minister remained committed to seeing it through. "The plan is working and that is why we believe the economy is healing," the PM's spokesman told a daily Westminster press briefing.
Asked how Mr Cameron viewed the loss of the UK's AAA status, the spokesman replied: "As the Chancellor said, it is a very clear message that Britain as a country cannot let up on dealing with its debts and demonstrating that it can and will pay its way in the world. It is a reminder, if anybody needed one, that the UK has a very significant debt and deficit problem, one that this Government is committed to continuing to tackle and deal with. We have a clear plan for doing that."
The spokesman declined to speculate on whether the other main ratings agencies, Standard & Poor's and Fitch, might follow Moody's in marking down the UK or when Britain might regain its cherished AAA rating. "Specific rating decisions are a matter for the ratings agencies," he said. "What the Government is committed to is seeing through the economic plan we have."